FAQ - State Tax

Q. What is the current state surplus line tax rate?

A. The current state tax rate is 3%.  

Q. What transaction date does a surplus line broker use to pay surplus line tax?

A. The due date for surplus line taxes is to be calculated from the surplus line broker’s "invoice date" rather than policy effective date. The invoice may not be more than 60 days following the policy effective date.

Q. When and how are surplus line taxes paid?

A. This is discussed in Section 8 of this Manual. Also, refer to the California Insurance Code Section 1775-1775.9.

Q. Is it necessary for a California consumer to pay the 3% tax when coverage is placed with a nonadmitted insurer on their own for their own property, without the assistance of an agent/broker?

A. California does require a direct placement tax from the consumer for coverage placed on their own for their own property with a nonadmitted insurer. Refer to Bulletins #621, #622 and #623.

Q. Who must make an annual state tax filing?

A. Every surplus line broker must make an annual state tax filing to the Insurance Commissioner. This is due on or before March 1 of each year. The amount of state tax is 3% of the California taxable nonadmitted premium transacted by the broker from January to December 31 of the previous year. This form must be completed by all brokers whether or not business was transacted. For additional information regarding the filing of state tax returns, contact the Tax Processing Unit (916) 492-3288.

Q. Who must make an electronic funds transfer (EFT)?

A. Brokers whose annual tax is $20,000 or more are required to participate in the electronic funds transfer program. To register as an EFT taxpayer, contact the DOI's EFT Unit at (916) 492-3288.

Q. What is the penalty for failure to pay state tax?

A. If a broker fails to pay state tax by the due date, it will result in a penalty of 10% of the amount of payment due plus an interest rate of 1% per calendar month or fraction thereof, until the payment is received by the Commissioner. More severe penalties may be imposed for "willful" violations.

Q. Who must make monthly state tax payments?

A. Every surplus line broker whose annual tax for the preceding calendar year was $5,000 or more shall make monthly installment payments. Refer to CIC Section 1775.5 through 1776.